Tackling crypto taxes in Brazil might seem like a headache, but it doesn’t have to be. With the Brazilian government tightening its grip on crypto regulations, staying on top of your tax game is more important than ever.
In this guide, we’ll explain the latest regulations in a way that makes it easier to understand the complex crypto taxation. This crypto tax guide will also reveal whether you’ll be taxed at a flat 15% rate or the progressive income tax scale, depending on your crypto activity in Brazil.
So, whether you’re a crypto novice just starting your investment journey or a seasoned trader looking for a tax refresh, this blog will equip you with the knowledge you need to confidently file your Brazilian crypto taxes in 2024. Let’s begin!
Are There Any Crypto Taxes In Brazil?
Yes, there are crypto taxes in Brazil. The Receita Federal (RFB) oversees cryptocurrencies’ taxation, considering them taxable assets.
If you sell cryptocurrencies and the total amount you sell in one month is more than R$35,000, you must pay taxes on the profits you make from these sales.
It’s important to know that these profits are classified as capital gains. The tax rates on these gains are progressive, increasing with the profit you earn. The rates start at 15% and can go up to 22.5%, depending on how much profit you make.
How Is Crypto Taxed In Brazil?
Brazil is one of the largest markets for cryptocurrencies globally and is at the forefront of adopting and regulating crypto in Latin America. Hence, Brazil’s government introduced crypto taxes to regulate crypto transactions in 2019 and 2020.
This framework guides both businesses and individuals on how to buy, store, transact with, and report cryptocurrencies according to Brazilian law.
In Brazil, cryptocurrencies are considered movable goods from a tax perspective. This classification means that any profits from selling crypto assets for Brazilian Real or other fiat currencies are subject to Capital Gains Tax.
However, these profits are only taxed if the total monthly transaction volume exceeds R$35,000. This transaction volume includes both exchanges of crypto assets for fiat currencies and exchanges for other crypto assets.
In the latest development, the Brazilian Senate has approved new income tax regulations requiring Brazilians to pay up to 15% tax on cryptocurrency profits held on foreign exchanges.
Starting January 1, 2024, individuals in Brazil who earn more than R$6,000 from foreign-based exchanges will be subject to this tax. The tax rate for funds held on international exchanges will be charged in the following manner:
- Uptil R$ 6,000: 0%
- From R$ 6,001 to R$ 50,000: 15%
- R$ 50,001 and above: 22.5%
However, profits from funds accessed before December 31, 2023, will be taxed at 8%, while those accessed after that will pay the 15% rate.
Can Receita Federal Track Your Crypto Transactions?
In September 2019, a new law took place in Brazil, giving the Receita Federal access to the transaction history of Brazilian individuals from local cryptocurrency exchanges.
This law was introduced to combat money laundering and tax evasion by giving tax authorities more visibility into Brazilian taxpayers’ crypto assets and transactions.
The law explicitly covers local exchanges in Brazil. However, foreign exchanges also cooperate with Receita Federal, providing information about their Brazilian customers.
As a result, Receita Federal probably knows about your cryptocurrency holdings. Therefore, it’s crucial to report your crypto taxes correctly to avoid potential fines or penalties, which could be significant and should be avoided at all costs.
Crypto Tax Rates In Brazil
The two essential crypto taxes for Brazilian taxpayers are Income Tax and Capital Gains Tax. Let’s have a detailed look at both of these crypto taxes in Brazil:
Income Tax
Like many countries, Brazil requires residents to pay taxes on their global income. This means you must pay income tax based on local rates whether you earn money from a Brazilian employer or a foreign non-Brazilian employer.
Depending on your income, these progressive tax rates range from 7.5% to 27.5%. Simply put, the more you earn, the higher percentage of your income goes to taxes.
It’s worth noting that there are no additional local or provincial income taxes on top of these rates, making the tax system in Brazil relatively straightforward.
Here are the income tax rates for monthly income in 2024:
Taxable Income (BRL) | Rate Of Taxation | Deductible Tax Amount (BRL) |
From 0 to 2,259.20 | Exempt | 0 |
From 2,259.21 to 2,826.65 | 7.50% | 169.44 |
From 2,826.66 to 3,751.05 | 15% | 381.44 |
From 3,751.06 to 4,664.68 | 22.50% | 662.77 |
From 4,664.68 and above | 27.50% | 896.00 |
Capital Gains Tax
When you sell an asset subject to capital gains tax in Brazil and make a profit, you must pay taxes on that gain. Capital gains tax applies to various assets, including:
- Art, collectables, and vehicles sold within or outside the country
- Cryptocurrencies or NFTs
- Stocks traded on international markets
- Real estate
- Interest earned from offshore investments
Depending on the total capital gain, understanding the rates for capital gains tax empowers you to make informed financial decisions based on your total capital gain.
Capital Gains (BRL) | Rate Of Taxation |
From 0 to 5,000,000 | 15% |
From 5,000,001 to 30,00,000 | 17.50% |
Above 30,00,001 | 22.50% |
However, stocks sold in Brazilian markets or over-the-counter (OTC) markets are not subject to the above-mentioned capital gains tax rates. Instead, they are taxed under equity income taxation rules at a flat rate of 15%.
How To Calculate Capital Gains In Brazil?
Calculating capital gains in Brazil can be rather challenging. To ease the process, we will consider a transaction involving only the sale of cryptocurrency.
To calculate the capital gain from a sales transaction, you must first determine the sales proceeds and the cost basis of the cryptocurrency sold. The sales proceeds are the value of the cryptocurrency in Brazilian real at the time of the transaction. The cost basis is the price at which you acquire the token and can be calculated using cost basis methods.
Brazil allows two main cost-basis methods for crypto:
1. First In, First Out (FIFO)
FIFO is a standard method used to determine the cost basis of cryptocurrencies in Brazil. Under FIFO, the cost of the first cryptocurrency acquired is considered the cost basis for the first cryptocurrency sold or exchanged. This method assumes that the cryptocurrencies are sold or disposed of in the order they were acquired.
2. Average Cost Basis (ACB)
Another cost-based method approved by Receita Federal is the average cost-based method. It considers the initial purchase price and adjustments such as transaction fees, commissions, and other acquisition costs. It provides a more accurate reflection of the cost of acquiring the cryptocurrency.
Now, let’s understand both with the help of an example.
Example:
John bought a total of 3 Bitcoins but at different intervals:
- 1 BTC bought on 20th January 2024 for R$ 50,000
- 1 BTC bought on 20th February 2024 for R$ 60,000
- 1 BTC bought on 20th March 2024 for R$ 70,000
He sold 2 BTC on 20th April 2024 for R$ 130,000.
FIFO Calculation
According to FIFO, the BTC bought in January and February is sold first. Hence, the cost basis stands at R$ 110,000.
Capital Gains = R$ 130,000 – R$ 110,000 = R$ 20,000
ACB Calculation
According to ACB, we calculate the average cost basis of the BTC bought:
ACB = (R$50,000 + R$60,000 + R$70,000) / 3 = R$60,000
Hence cost basis of two BTC = R$ 60,000 x 2 = R$120,000
Capital Gains = R$ 130,000 – R$ 120,000 = R$ 10,000
Taxes On Lost Or Stolen Cryptocurrencies in Brazil
Lost crypto refers to digital assets that are inaccessible due to forgotten passwords or misplaced wallets, while stolen crypto pertains to assets taken without permission through hacking or scams.
In unfortunate cases where you lose your cryptocurrency, or it gets stolen, there is no tax implication. This interpretation means you do not have to pay taxes on lost or stolen crypto. However, Receita Federal has yet to issue specific guidelines on lost or stolen cryptos.
How Are Different Crypto Transactions Taxed In Brazil?
Here’s how crypto taxes in Brazil functions on different crypto transactions:
Buying Cryptocurrency With Fiat Currency
Buying cryptocurrency with fiat currency is currently not taxed under the current rules. However, it’s crucial to keep detailed records of your purchases. This information is essential for calculating any profits or losses when you decide to sell the coins in the future.
Selling Cryptocurrency For Fiat Currency
When you sell or exchange cryptocurrency for fiat currency like Brazilian real or US Dollars, it’s considered a taxable transaction by the Receita Federal. You are required to calculate the gains from the sale. Profits from these transactions are subject to taxation, ranging from 15% to 22.5%. However, this tax is applicable only if the total sales amount exceeds R$35,000 in the same month as the profitable transaction occurred.
Swapping Crypto With Another Crypto
Swapping one crypto asset for another, known as a like-kind exchange, is considered a taxable event in Brazil. You will have to pay a capital gains tax on the gain you make from exchanging the initial crypto for the final one.
Moving Cryptocurrency Between Wallets
In Brazil, transferring cryptocurrency between your wallets doesn’t incur taxes. However, maintaining transaction records is essential to calculate capital gains when selling or disposing of your crypto assets.
Spending Crypto For Purchase Of Goods Or Services
When you use your cryptocurrency to purchase goods or services, this transaction is considered taxable as a capital gain. Essentially, you’re viewed as selling your crypto at the current market value and then using the proceeds for the purchase.
The difference between what you originally paid for the crypto and its value at the time of the transaction is subject to capital gains tax.
Crypto Mining Rewards
Receita Federal has yet to issue an official statement regarding the taxation of cryptocurrency mining in Brazil. It remains to be seen whether mining rewards should be taxed as personal income upon receipt, as capital gains upon sale, or only when the coins are sold in the future.
However, as per local tax advisors in Brazil, mining rewards are likely treated as an initial acquisition and thus not subject to immediate taxation upon receipt into the individual’s wallet.
Instead, taxation would typically occur when the mined coins are sold. In this scenario, mining rewards would only be taxed at the time of sale if the total sales exceed R$35,000 in the same month the rewards are sold.
Taxes On Crypto Airdrops
Brazil has no specific tax guidance regarding cryptocurrency airdrops, like mining, and staking rewards. Therefore, we assume that crypto airdrops aren’t taxable unless you decide to dispose of them, like crypto mining and staking rewards.
Crypto Derivatives
Dealing in crypto derivatives, such as futures or options, can also lead to taxable events. The profit or income generated from these activities is interpreted as taxable under capital gains.
However, it is essential to note that this is based on an interpretation, as Receita Federal has not provided specific guidelines for taxing crypto derivatives.
Receiving A Salary In A Cryptocurrency
Being paid in cryptocurrency, whether as a salary from employment or in exchange for freelance services, is taxed similarly to receiving payment in Brazilian real or another fiat currency.
From a tax perspective, there is no significant distinction based on the currency type received—income is taxed as income regardless of any kind of crypto.
You can use cryptocurrency prices sourced from reputable exchanges to determine the income amount in Brazilian real at the time of receipt.
How Are NFTs Taxed In Brazil?
Receita Federal still needs to provide specific guidance on the taxation of NFTs (Non-Fungible Tokens) in Brazil. NFTs are anticipated to be taxed similarly to other forms of cryptocurrency assets.
You will likely trigger a capital gain or loss when you sell or dispose of an NFT. This depends on whether the value of your NFT has increased or decreased since you acquired it.
Additionally, purchasing an NFT with cryptocurrency is typically considered a form of disposal of your crypto assets.
Therefore, you may also incur a capital gain or loss based on the change in value of your cryptocurrency from when you acquired it to when you used it to purchase the NFT.
How Are DeFi Activities Taxed In Brazil?
Understanding how different DeFi (Decentralized Finance) transactions are taxed in Brazil can be challenging. Here’s a simplified guide based on the limited guidance from Receita Federal and an analysis of similar transactions in other jurisdictions:
Receipt of Crypto As Staking Rewards
This transaction is taxable as a capital gain when you receive cryptocurrency as a reward for staking. Staking involves:
- Participating in a proof-of-stake network.
- Locking up your crypto to support network operations.
- Receiving rewards in return.
However, it’s crucial to note that Receita Federal has not yet provided clear guidelines on the taxation of DeFi activities. This uncertainty should prompt caution in your financial decisions. This opinion is based on limited guidance and analysis of similar transactions in other jurisdictions.
Providing Liquidity in Liquidity Pools
Providing liquidity involves depositing your crypto into a liquidity pool on a DeFi platform to facilitate trading and earn fees. This transaction is considered taxable as a capital gain.
Lending Crypto
Lending crypto on a DeFi platform is not taxable, as lending tokens is generally a nontaxable event in Brazil. However, you can trigger a capital gains transaction if the lending involves getting liquidity provider (LP) tokens. If you earn interest from this lending, that interest will be categorized under Income Tax.
Borrowing Crypto
Borrowing Bitcoin or any other cryptocurrency from a decentralized finance (DeFi) platform is not taxable. This means you can borrow crypto assets without tax liability in Brazil.
Yield Farming
Yield farming, known as liquidity mining, involves earning rewards by staking or lending crypto assets in DeFi protocols. As a participant, you typically move your assets across various platforms to maximize returns. This activity is considered taxable as a capital gain.
The rewards you earn, whether as tokens or additional crypto, are assessed based on their market value at receipt and are subject to capital gains tax.
Wrapping Tokens
Wrapping tokens involves converting a cryptocurrency into a wrapped version on different blockchains or platforms. For instance, wrapping Bitcoin (BTC) into Wrapped Bitcoin (wBTC) allows you to use BTC on the Ethereum network.
This transaction is considered a taxable event because it’s treated as a disposal of the original asset. Any gain realized from the wrapping process is considered capital gain and is subject to tax.
Crypto Consumed For Gas Fees
When you use cryptocurrency to pay for gas fees to perform transactions on blockchain networks, such as executing smart contracts or transferring tokens, these fees can be adjusted on a cost basis.
This means the amount spent on gas fees can be subtracted from your overall gains when calculating taxable income, effectively reducing your tax liability.
Understanding these aspects can help you manage your DeFi transactions and ensure compliance with tax regulations in Brazil.
While some interpretations lack specific guidelines from Receita Federal, staying informed and consulting with a tax professional can provide further clarity and help you navigate these complexities effectively.
How To Calculate Your Crypto Taxes In Germany?
Figuring out how much German crypto tax you owe can feel daunting, but it doesn’t have to be. Here’s a breakdown of three ways to tackle your crypto tax calculations:
Use a Crypto Tax Calculator
This is the simplest option, especially if you’ve made a lot of trades throughout the year. Crypto tax calculators like KoinX can connect to your cryptocurrency exchanges and wallets. Once connected, it’ll automatically generate a report summarising your capital gains and losses. This saves you time and effort on the cost of decided fees that may be associated with using these services.
Get Help From An Accountant
If you need help navigating crypto tax regulations or have a complex tax situation, consider hiring an accountant specialising in cryptocurrencies. They’ll have the expertise to handle crypto transactions and file taxes correctly. While this option offers peace of mind, it can also be expensive.
Do It Yourself (DIY)
This is the most time-consuming route, but it can save you money on accounting fees. However, it’s essential to be familiar with the crypto tax regulations in your country. Remember, tax laws can vary depending on your location. If you decide to go the DIY route, research beforehand to ensure you calculate everything correctly.
German Cost Basis Method
According to BMF guidance, FIFO (First In, First Out) is the preferred method for calculating crypto taxes when specific units cannot be identified. This means that the coins you acquired first are considered sold first when calculating proceeds and profits.
However, in a May 2022 update, the BMF introduced a requirement for a ‘wallet-by-wallet’ analysis to determine the “sequence of use” of sold units. For each wallet you hold crypto in, you need to track the acquisition and sale of coins separately within that wallet.
German Cost Basis Method
The German tax year spans from January 1 to December 31. Usually, the tax deadline is July 31 each year, which shifts to the next working day if it falls on a weekend.
However, due to the COVID-19 pandemic, deadlines have been extended. For instance, you have until September 30, 2024, to file your 2023 tax return.
If this date lands on a weekend, the deadline moves to the subsequent working day. This adjustment allows taxpayers extra time to meet their obligations during exceptional circumstances.
How To Reduce Your Crypto Taxes In Brazil?
Reducing your crypto taxes in Brazil requires a strategic approach and a thorough understanding of the available deductions and tax treatments.
Here’s a detailed guide on how to effectively reduce your crypto tax liability:
Treatment of Transaction Fees, Gas Fees, and Brokerage Fees
Transaction, gas, and brokerage fees incurred during crypto transactions can be deducted from your overall gains.
This includes fees for transferring crypto, executing smart contracts, or trading on exchanges. These expenses can reduce your taxable income, thereby lowering your tax liability.
Donating Crypto
Specific donations to cultural, audio-visual, and sports projects are tax-deductible up to a particular limit.
While there is no specific guidance for crypto donations, it’s reasonable to assume that donating cryptocurrency could be treated similarly to donating cash or other assets.
Keeping detailed records and consulting with a tax professional can help ensure your donations are appropriately documented and deducted.
Deducting Interest on Crypto Borrowing
If you have borrowed crypto and pay interest, the interest expenses can be deducted. This deduction is applicable as long as the borrowing is for investment purposes and the interest payments are documented.
However, consult a tax professional to confirm eligibility for this deduction in your specific case.
Offsetting Capital Losses
You can offset crypto capital losses with other capital gains from crypto or non-crypto assets. This means if you have made a loss on one crypto investment, you can use that loss to reduce the taxable gains from another investment, minimizing your overall tax liability.
Carry Forward Your Losses
Tax losses can be carried forward indefinitely in Brazil, allowing you to use them to offset future gains.
However, with these carried-forward losses, you can only offset up to 30% of your taxable income in any given period.
This provision ensures that losses can help reduce tax liability over multiple years, providing long-term tax planning benefits.
How To Calculate Crypto Taxes In Brazil?
Calculating crypto taxes in Brazil involves a clear understanding of your transactions and the relevant tax regulations. You can calculate it in any of the two methods:
Calculating Your Crypto Taxes Manually
This method requires discipline and record-keeping. Here’s what you need to do:
Gather Your Transaction Records:
Collect all your crypto transaction records, including dates, amounts, values at the time of transactions, fees paid, and the type of transaction (buying, selling, mining, staking, etc.).
Determine the Cost Basis:
The cost basis is the original value of your crypto asset at the time of purchase, including any fees paid. Brazil allows you to follow FIFO or ACB to determine your cost basis. Calculate the cost basis for each transaction to determine your gains or losses using any of the above methods.
Calculate Capital Gains/Losses:
For each transaction, subtract the cost basis from the selling price to determine the capital gain or loss.
Apply the Relevant Tax Rate:
Capital gains tax rates in Brazil can vary. Check the current tax rates applicable to your situation and apply them to your calculated gains.
Account for Deductions and Losses:
Apply any allowable deductions, such as transaction, gas, and brokerage fees. Also, offset any capital losses against your gains as applicable.
This method is faster and more efficient, especially for those with complex trading activities. This is where you can use KoinX, a leading crypto tax software worldwide, to generate an accurate crypto tax report. Here’s how KoinX can help:
Sign Up and Connect Your Accounts:
Create an account on KoinX and connect your crypto exchanges and wallets. KoinX supports various platforms and allows you to import your transaction data automatically.
Import Your Transaction Data:
Once connected, KoinX automatically imports your transaction history, including buys, sells, trades, staking rewards, and other activities. You have to ensure all your data is correctly imported for accurate calculations.
Review and Categorize Transactions:
KoinX categorizes your transactions based on the type of activity (e.g., buying, selling, trading, staking). You can review these categorizations to ensure accuracy. You can also manually adjust any incorrectly categorized transactions.
Calculate Cost Basis and Gains/Losses:
KoinX calculates the cost basis for each transaction and determines your capital gains or losses. The software uses various accounting methods, such as FIFO (First In, First Out) or LIFO (Last In, First Out), based on your preference or local tax laws.
Apply Deductions and Losses:
KoinX allows you to input deductions, such as transaction fees and gas fees. It will also help you track and apply capital losses to offset gains.
Generate Tax Reports:
KoinX generates comprehensive tax reports summarizing your gains, losses, deductions, and net taxable income. These reports are formatted to comply with Receita Federal requirements and can be directly used for tax filing.
File Your Taxes:
Use the generated reports to fill out your annual tax return. KoinX’s detailed documentation ensures you have all the necessary information to support your filings and minimize errors.
How To Report Crypto Taxes In Brazil?
After calculating the capital gains and income from all your transactions throughout the tax year, the final step is to report your cryptocurrency taxes on your tax return by the deadline, which falls on the last working day of April the following year.
Keep Records Of Crypto Investments
Residents worldwide, including those in Germany, need to keep detailed records of cryptocurrency transactions for five years as per tax office requirements. Here’s a breakdown of the essential records you should maintain:
- Transaction Dates: Record the date of each cryptocurrency transaction you make.
- Transaction Value: Note the cryptocurrency’s value in Euros at the time of the transaction. You can obtain this information from a reputable online exchange.
- Transaction Details: Document the purpose of each transaction and the details of the other party involved, even if it’s just their cryptocurrency address.
KoinX can simplify your record-keeping. By syncing your account from over 270 blockchains, wallets, and exchanges, our platform provides a central dashboard to record and view all your crypto activity. The great news is that portfolio tracking is available with our free plan. So join KoinX today and keep accurate records of your crypto investments.
What Happens If I Don't File My Cryptocurrency Taxes?
The BZSt is committed to making sure all taxpayers fulfil their tax obligations. If you’re still determining whether you’ve accurately reported your crypto taxes in past years, it’s wise to be proactive and amend your previous tax reports.
In Germany, tax evasion is a criminal offence. Depending on the intent and severity of the offence, it can result in penalties or even a prison sentence of up to five years.
How Can KoinX Help With Your Crypto Taxes in Germany?
Are you dreading the complexities of reporting your crypto taxes in Germany? KoinX can be your knight in shining armour! As an automated crypto tax reporting platform, we streamline the entire process, saving you time, frustration, and, potentially, a hefty tax bill.
KoinX goes beyond simple tax reporting. It’s a comprehensive crypto portfolio tracker that meticulously gathers your transaction data, classifies it according to German tax regulations, and generates a compliant tax report ready for submission.
Here’s how KoinX tackles your German crypto tax woes:
- Integration From Over 270 Platforms: No more manually combing through endless exchange and wallet statements. KoinX seamlessly connects with over 270 platforms, automatically fetching your transaction history.
- Automatic Transaction Import: Say goodbye to endless spreadsheets! KoinX imports your transactions, eliminating the risk of human error and ensuring complete data for accurate tax calculations.
- Unified Portfolio Overview: Gain a crystal-clear picture of all your crypto holdings in one place. KoinX offers a unified portfolio overview, making tracking your investments and identifying potential tax implications easy.
- Wide Range of Supported Cryptocurrencies: Whether you’re a seasoned crypto investor or just starting, KoinX has you covered. It supports many cryptocurrencies, ensuring all your digital assets are accounted for.
- Auto-Classification Of Transactions: German tax laws can get tricky. KoinX takes the guesswork out of it. Its auto-classification feature intelligently categorises your transactions according to German tax regulations (e.g., buying, selling, staking), ensuring your tax report reflects the correct tax treatment.
- Tax Report Export: KoinX generates a tax report specifically formatted for German tax authorities once everything is categorised and calculated. Export it, and you’ll be ready to file!
So sign up on KoinX today and make filing your German crypto taxes a breeze.
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Frequently Asked Questions
Is Cryptocurrency Legal In Germany?
Yes, cryptocurrency is legal in Germany. According to BaFin crypto regulations and the KWG (German Banking Act), individuals and businesses can buy, sell, and trade cryptocurrencies. However, cryptocurrencies are not recognised as legal tender in Germany. Instead, they are classified as “units of account.”
Is It Legal To Mine Crypto In Germany?
Yes, crypto mining, like Bitcoin mining, is legal. However, if you operate commercially, you will need a BaFin licence.
How Can I Cash Out My Crypto In Germany?
To cash out your cryptocurrency in Germany, you can use exchanges like Binance or Kraken to sell your crypto for euros. You can then transfer the euros to your German bank account. Don’t forget to report this transaction to comply with German tax laws.
Do I Report Crypto If I Didn't Sell It?
You should report your cryptocurrency holdings in Germany even if you haven’t sold them. This includes any staking or lending income. Accurate reporting ensures compliance with German tax regulations and avoids potential legal issues.
Does Binance Report To Tax Authorities In Germany?
Binance complies with international regulations and reports relevant transactions to tax authorities, including Germany. This helps ensure users meet their tax obligations. Therefore, we suggest that you always maintain accurate records of your transactions for tax reporting purposes.
